This article is written by Hu Tianjian, a veteran of internet finance in China. The article was originally published on the author’s WeChat account. Republished here at TLD with author’s permission. Translated into English by Vanessa Voon. 

TLD has been following the development of internet based insurance (part of insuretech) in China. There are lots of interesting twists there. We wrote about Woai Duobaoyu (literally “I love Turbot”), the main company featured in this commentary, as well. 


  1.     Red ocean

 In May-June of 2018, a Chinese insurtech company called Duobaoyu (loosely translated into means “I love Turbot”, and can also mean “Fish that protect many things”)  appeared on Douyin, the Chinese version of Tik Tok. It gained a first-mover advantage – the first insurtech to be supported by near-free consumer traffic and earned millions in a short span of 1-2 months. That’s right, this is the first appearance of Duobaoyu (I love Turbot), the star insurtech player in China, and it brought much attention to the internet insurance industry. This was also when I also just found out that the insurance commission at that time was so high that I was shocked. 

After the ‘315’ (Consumer Rights Day) in 2019, many fintech companies were worried about changes in the fintech regulations.  

[Sidenote: Consumer Rights Day falls on the 15th of March. Every year, China central television will broadcast a widely watched gala where computers violating consumer rights are exposed. It often leads to regulators taking action. In 2019, Consumer Rights Day did an expose on fintech lending and companies that acquire customers for fintech lending.]

Because of this, almost every well-known fintech company at that time was concerned and had tried to jump onto the internet insurance bandwagon. It was a safer (as far as regulatory-risks are concerned) way to monetize their consumer traffic.  It was just as lively as the current community group buying in 2020.  The difference was that the community group buying had great competition, and internet insurance was obscure. It was literally a red ocean that turned into a bloodbath. 

By the end of 2019, large and small players that participated in the insurtech competition came to a realization of the massive casualties. The insurance intermediary license pricing, a strong indication of the market, went down. The industry had officially cooled down. 

What did the players do? Those that had just dipped their toes into this industry exited quickly; those that had already established themselves continue to lead, and those that had invested a significant amount of money and energy, but had not yet become a leader – were stuck. 


  1.     Lone walk 

We seldom hear about problems things are going well, but when things start to go south – all types of problems start emerging. This was the case for Duobaoyu. 

However, there’s a Chinese saying “When the tide recedes, you will see the naked swimmers; and you can also see those that go with the flow”. Duobaoyu was one of the lucky few established leaders that went with the flow after the industry cooled down. After multiple rounds of financing, Duobaoyu has accumulated more time and capital than other companies to find a way out of its’ problems.

Duobaoyu had 4 fundamental problems:  

 First, the reason why fintech companies prior to 2019 were able to succeed was largely due to the ability to obtain traffic at a very low cost at that time. This was because there was little competition. This is exactly how the first wave of Chinese cross-border e-commerce companies took off as well (Google ads were much cheaper than they are today). 

Sounds attractive, but under this customer acquisition + sales model, the barrier of entry was so low that insurtech businesses could spring up like mushrooms. At that time, any random sales company could find an internet company to start a fintech and acquire customers. Not many people at that time could decipher how Douyin and SEO/ SEM acquired their customers. Even if people did know, it would not mean that they were unable to do it. On the contrary, late comers could have found more competent and effective ways in customer acquisition, as well as in sales. 

The early adopter had first-mover advantage. Late joiners, no matter how competent, had to deal with intense competition. With intense competition, the cost of traffic increased, and the cost of acquiring customers similarly soared. Those who have not reached the first base were eliminated immediately. But the stark reality was – even those early adopters – who had originally had cost savings, saw their profit scrapped when the customer acquisition cost went up. It was only a matter of time before the first mover cost advantage was lost. Duobaoyu was stuck in this predicament. 

Second, when the cost is low, many insurtech players leveraged on providing good services to attract and retain customers. However, once the cost increases, only those insuretech that are able to charge customers high commission can continue to provide the same level of service. For those players that cannot afford to give high commission – the customer experience will decline. Hence B2C insurtech businesses that had previously focused on service will find it hard to survive if they are not able to compete on commission. This was the second problem Duobaoyu faced. 

Third, companies that are big but not strong are like the late Qing dynasty – it will fall with the slightest tension. 

[Side Note: The late Qing dynasty was the dynasty that ruled China between 1644 to 1912, and was the last dynasty of China. It was the fourth-largest empire in world history in terms of territorial size, but it was weak. The dynasty was taken advantage of by external forces. The Opium Wars, Taiping Rebellion, Dungan Revolt, First Sino-Japanese war, loss of Taiwan, and Hong Kong all happened during this period.] 

At its peak, Duobaoyu had allegedly thousands of employees; but post-2019, it had shrunk to about 400 employees, mostly sales folks who had the biggest say in the decision. An insurtech company needs to have a core tech competence, else it will just be a traditional company clocked with a “tech” label. This kind of company will find it hard to attract talent to drive the company forward, no matter how much the companies are willing to pay. Only employees content with the stagnation and the illusion will stay. This was another fundamental issue plaguing Duobaoyu. 

Fourth, a common problem of startup companies is that they do not know how to properly run a business. If the leaders of Duobaoyu had understood the development of “” (个推) – perhaps they would have had to better strategic 

[Side Note: Getui is a market tech company that aims to increase its clients’ customer engagement and open rates through app push notifications. They have implemented quite a number of innovative engagement strategies – and are doing very well in China.] 

I would like to emphasize an important point – When starting a business, problem-solving should be the core strength of a business. Problems that the business solves will lead to the direction that the business will take. Founders shouldn’t be led by capital or your investors on what they should do, the founders need to trust their problem-solving gut sense – they are the ones building a business. 


  1.     How to break through the problems above? 

Whilst the original cost advantage has been eroded, all is not lost. Businesses need to look at the problem from a different angle. If a business is not able to get direct low-cost traffic, then they could build their own traffic pool. 

This was what Duobaoyu had tried to do – there were many attempts, but they had only been attempting to build up traffic around a small area – led by traditional sales leaders.  (I am not belittling any sales mentality, but folks with traditional sales mindset generally have tunnel vision. This is unlike leaders with tech mindsets that can empower and drive the businesses into new frontiers). 

If it were me, what would I do? 

If it was me, what would I do? I would push the time forward. We all know about “Shui Di Chou” (水滴筹) (a.k.a. Waterdrop to non-Chinese speakers) one of the most successful insurtech company of all time.  It was the emergence of companies like Shui Di Chou that lead the second wave of companies like Duobaoyu. What did Shui Di Chou do well? They rolled out various mutual assistance programs where the public could chip in to solve the problems of people or categories of people in China that did not have sufficient protection. This kind of protection is basically insurance in disguise. Shui Di Chou became famous because of this. 

[Side Note: Mutual Assistance Programs in China are like “Go Fund Me” programs where the public can donate small amounts to help certain people or categories of people in need. Shuidi Chou a.k.a Waterdrop just raised USD230 mil in it’s Series D round jointly led by Swiss Re Group and Tencent] 

In 2019, when the regulators introduced new insurtech regulations to rein in online insurance lead generation, Shui Di Chou was ready. They had already used this time difference to accumulate a considerable number of users -who were sticky – and they naturally were able to adjust to any new regulations made. 

On the contrary, Duobaoyu had always been using the sales model, which had a lot less customer stickiness factor. It was becoming obvious that official accounts and simple insurance selecting apps are useless in retaining customers. 

In December 2019, I had tried to kick-start a project to replicate the ‘guarantee of labour security” strategy to attract and retain customers. The following was a mind map that I did: 

When I thought about this project, it happened that various companies were laying off employees due to economic reasons. Labor security projects, similar to Internet union projects, protect the labor rights of the general public. It seems that I have not seen a similar platform thus far. The current situation will only be more severe, and more companies will use the excuse of the “pandemic” to exploit the reality. Once they can use ‘labor security’ as an excuse to gain more traffic, they can gain more possibilities.

Of course, there are many types of protection/insurance projects. The above is just one aspect that I have thought of with a wide range of aspects. Others, such as medical insurance, pension insurance, etc., can all become important points of entry. 

It’s just that as the scene experience changes, the way you play your cards – ala Doubaoyu or Shui Di Chu, or another model – will determine the outcome you arrive at.


Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].